Question

“Every airline has what is called a break-even load factor. That is, the percentage of seats the airline . . . (flies) . . . that it must sell . . . to cover its costs. Since revenue and costs vary from one airline to another, so does the break-even factor. . . . Overall, the break-even load factor for the (airline) industry in recent years has been approximately 66 percent.”The airline industry is notorious for boom and bust cycles. Why is airline profit-ability very sensitive to these cycles? Do you think that during a down cycle the strategy to consolidate routes and raise ticket prices is reasonable? What would make this strategy succeed or fail? Why?Source: http://www.avjobs.com/history/airline-economics.asp